Israel has made clear to both the Palestinians and Americans that there will be consequences if Fatah and Hamas set up a national unity government without Hamas adhering to the Quartet's three conditions: renouncing violence, recognizing Israel and accepting previous Israeli-Palestinian agreements. A senior government official said Israel has passed on unequivocal messages that it would not quietly accept the situation. The official declined to say what measures Israel would take, or whether it would cut off ties with the PA as a result. The official's comments came amid reports that Fatah had accepted Cairo's proposal for reconciliation with Hamas, and that senior party official Azam Al-Ahmad was set to hand over the signed document to the Egyptians. Nevertheless, a Hamas official said that his group was still holding consultations on the matter, and denied a report by the Palestinian Ma'an news agency that the organization had already accepted the proposal. Cairo has requested that each side sign the proposal by Thursday, and that an official ceremony on the deal be held at a later date. Fatah has threatened to unilaterally declare elections at the start of next year if Hamas refuses to sign the deal. The US, meanwhile, has also made clear to the Palestinians that it would only deal with a Palestinian national unity government if Hamas met the international community's three conditions. Israeli officials, however, were skeptical that the Egyptian-brokered reconciliation would take place, with one diplomatic source saying that there had been numerous reports in the past few months of an agreement, and they all failed to materialize. Hamas was not interested in reconciliation, the source said, but rather looking for a way to carve out a niche for themselves in the West Bank. Palestinian Authority Prime Minister Salaam Fayad, meanwhile, said that Prime Minister Binyamin Netanyahu's declared support for Palestinian statehood falls well short of what the Palestinians wanted and could lead to a "Mickey Mouse" state. Netanyahu has said he supported the creation of a Palestinian state on the condition that it not be able to threaten Israel - meaning that it must be demilitarized and not have complete control of its airspace, water or borders. These restrictions, Fayad said, would "amount to a Mickey Mouse state, if that, and that is not what we are looking for." Fayad, at a press conference in Ramallah, called on Netanyahu to "unequivocally" recognize the concept of a viable, independent Palestinian state in all of the West Bank and Gaza Strip. Fayad said that international involvement was critical in Middle East diplomatic efforts and - in contrast to a Fatah memo that was made public this week - said he was not disappointed with the initial results of President Barack Obama's involvement in peacemaking. "Leaving it up to us and the Israelis to figure out has contributed to the outcome from which we're suffering right now," Fayad said. "This is not about politics, it's about physics. Israel is in control of the territory. That's the fundamental asymmetry of this issue." Bloomberg contributed to this report.